No new tax breaks for mining in the latest federal budget

A budget aimed at reducing the federal deficit to $6.5 billion in 1996 from $30.5 billion this year and putting a cap on inflation had nothing in store for the Canadian mining industry. Requests for tax deductions on contributions made by mining companies to provincial reclamatoin funds went unanswered as Finance Minister Michael Wilson attempted to deliver on his debt reduction promises.

As expected, the only tax breaks contained in the budget were extended to small business owners and the disabled rather than to investors willing to place their money in mining stocks.

However, while federal spending will increase by 5.1% this year, mining industry representatives support Wilson’s attempt to tighten the federal purse strings and cut interest rates. “If you look at the thrust of the budget, we are headed in the right direction,” said George Miller, president of the Mining Association of Canada, after attending the budget breakfast in Ottawa.

“Attempts to get the deficit and interest rates down,” he said, “should have been more vigorous when the economy was good.”

Like Prospectors and Developers Association of Canada President Robert Ginn, Miller was not surprised that mining wasn’t singled out for new tax deductions.

But according to Ginn, that the government is planning to encourage Canadian pension funds to shift more money away from fixed income vehicles and into equities is an encouraging sign.

Under the plan, the federal government is proposing to introduce tax credits and levies on the value of pension fund holdings in Canadian stocks to eliminate a bias that favors debt investments at the expense of equities.

“Canada and Australia are the only developed countries where debt investments currently pay more than equities,” said Ginn. He is concerned that if the government does not do something to make equity paper more attractive to investors, Canada’s mining industry will slowly wither away.

“Bit by bit we will lose the economic base on which Canada is so dependent,” Ginn said.